Words by Jennifer Purdie
CEO – Adani Australia Renewables
When it comes to the state of Australia’s energy market, there’s certainly a lot of discussion in the media. Unfortunately a lot of it tends to be more like a game of ping-pong, going back and forth between what’s ‘good’ and what’s ‘bad’, than a conversation that informs and engages our community. Is coal good or bad? Are renewables good or bad? Or is the true story a lot more complex?
We need to de-politicise the commentary and focus instead on how we’re going to make the transition towards more renewables in our energy mix work. We need a national conversation that respects the different perspectives and talks honestly about the issues, and the economic and environmental consequences of the pathway that we choose.
I can’t highlight enough how important it is to get a globally competitive energy price for our economy, both to our industries which provide us with employment and to domestic consumers, including the most vulnerable. From a business perspective, we have a small population a long way from customers in global population centres. Compared with global averages we enjoy a high standard of living and we have high labour costs. A globally competitive energy price helps our businesses compete in global markets.
How do we provide a solution to the customer, at a competitive price, when and where they need their electricity, and what’s the best way to do that? And how do we do that at the same time as increasing our portion of renewables versus traditional energy sources?
These are the questions I find myself grappling with. Affordable, reliable and secure energy is overwhelmingly a good thing – it drives economic growth, opportunity and community cohesiveness and well being. We need to make Australia’s energy mix work for all Australians – the ongoing transformation of our energy system is not something we can afford to get wrong.
Some people see our economic well being and the health of our businesses as disposable. They see emissions reduction as a goal that should be achieved at any cost. People I know in our resources and manufacturing sector are deeply concerned about our environment, and at the risk that changes in weather patterns are due to human-induced climate change. It is a risk that we should seek to mitigate by reducing carbon dioxide emissions, and this is a responsible course of action. I also recognise that there are divergent views in the climate science community, and that the scientific consensus on how we should interpret the emergent data to predict the future will continue to develop.
However science also tells us our actions in Australia do not determine or even significantly impact global outcomes, and politics tells us that we will not influence larger global players to significantly change their behaviour. The slogan of ‘coral or coal’ as an outcome we can determine in the Australian context is a naive simplification. Those who advocate a balanced approach and a questioning mindset towards evolving datasets should not be demonised as ‘climate deniers’.
With a material risk of more severe weather patterns including floods, cyclones and bushfires into the future, a strong economy will be even more important to enable our society to adapt aspects such as our infrastructure if required and to support affected communities in managing weather related events.
Using existing infrastructure to support the transition
As we make this transition as cost effectively as possible, we need to harness our existing infrastructure to support this process.
So instead of only talking about how fast we can push coal fired generators out, or conversely how we can build more, there’s another conversation around how can we keep the ones we’ve got for as long as makes economic sense – by making them financially and operationally viable for as long as possible – so we can manage our prices.
By that I’m not saying the life of a 60-year-old coal plant should be extended. I’m saying that where they’ve got economic life left in them, it’s to all our advantage if we can find a way for those plants to stay in the system for longer so that they can continue to serve the renewables as the renewable base grows. This may require changes to the design of our market and retrofitting of infrastructure to make it more flexible.
Another thing that isn’t often talked about is the system cost of energy.
When people talk about how cheap renewables are – and that is correct, that the actual cost of energy at the time and place it is generated is highly competitive with other new energy infrastructure – what they don’t talk about is the actual cost of getting that energy to a customer when and where they want it.
So if that if that requires new transmission or system strengthening infrastructure to be constructed, if that requires storage solutions to be constructed, they’re not putting that into the overall cost when they’re saying renewables are cheaper.
I don’t think looking at costs in this way will change the conclusion that we’re going to move to a much higher share of renewables in the mix. But I think it changes the relative differences in costs.
Furthermore, while we have lots of great sunshine, we have very high infrastructure development costs in Australia. This presents a challenge for our ambitions to become a global energy superpower based on renewables, or to develop a competitive hydrogen industry.
I suspect we’d have to work very hard on getting our infrastructure costs down, perhaps look at what level of modular construction we can have, and how we can use less high-cost labour in the construction of those facilities to be able to be globally competitive in the renewable space. Because other countries, such as in South America, have both good solar resources and much cheaper labor costs.
If we want to remain globally competitive, as we transition to a greater percentage of renewables, there are a lot of challenges and they will require some creative solutions.
Conversations at the consumer level
There are also things we can do at a consumer level to remain competitive and manage prices in the transition to renewables. Australians need to realise that their own behaviours and attitudes might have to go through a bit of a transition also.
Things like demand response, for both industry and domestic customers, should be considered. Consumers could make it work for themselves to use energy at a different time of the day when it is cheaper, and then share in the reward of that through cheaper prices, if we could accept greater time-of-use signals in our electricity pricing structures. Energy efficiency, particularly at times when system cost is high, also becomes increasingly important.
Unfortunately, a lot of people think of demand response and assume it’s a third-world thing that you means can’t have power when you want it. But there’s a difference between saying you can’t use the power at a reasonable price, and saying that if you change your behaviour in a way that suits you to use power at a different time, it would end up cheaper for you.
There are a lot of discussions like that which could be a lot more constructive and a lot more nuanced, at all levels of the conversation, so people properly understand the many intricacies and factors at play in making this transition successful while still ensuring Australia’s economy remains strong.
An honest respectful conversation about the issues, perspectives and solutions to meet the needs of all Australians is required. The sort of public scrapping that goes on just leaves people confused and disengaged. It’s dangerous to apply black-and-white thinking to such a nuanced and important issue.